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Foreign telecom investors move PM on policy swings — `Conflicting signals may jam funds flow'

G. Rambabu

"After eight years of private sector entry into telecom, India still lacks a world-class interconnect regime. The regulator refuses to ensure interconnection or intervene, in spite of massive misuse of market power by the incumbent. Unfortunately, while interconnection is solely a regulatory power, there are hints of Government intervention."

NEW DELHI, Nov. 19

A CLUTCH of high-profile foreign investors - Singapore Telecommunications Ltd, Hutchison Telecommunications Ltd, and First Pacific Company Ltd - who have huge stakes in the domestic cellular industry, have shot off an SOS to the Prime Minister, Mr Atal Bihari Vajpayee, seeking his intervention to ensure a "stable policy environment."

In separate letters sent to the Prime Minister, Mr Dennis Lui, Group Managing Director, Hutchison Telecommunications, Mr Lim Toon, COO, SingTel, and Mr Michael J.A. Healy, COO and Finance Director, First Pacific, have noted that both the Department of Telecommunications (DoT) and the Telecom Regulatory Authority of India (TRAI), have through their actions only added to the "confusion and nervousness" of the foreign investors.

"The cellular sector is carrying huge losses and there still remain some grave concerns that are threatening the very existence and economic well-being of the cellular industry. The Indian Government has issued further statements conflicting with the stated policy and producing more uncertainty in a sector that is in need of clarity to encourage the huge investments required for the future. While there is a need for policy to keep pace with continued developments, the changes to such policy must be the result of a fair and transparent process," they have said.

While SingTel has a significant stake in Bharti TeleVentures Ltd, First Pacific has a 49 per cent stake in Escotel Mobile Communications Ltd and Hutchison in various cellular ventures across the country in partnership with Essar and other Indian companies.

Pleading with Mr Vajpayee to prevent the overlap between regulatory, policy and legislative functions in telecom, they have noted that unless corrective measures are introduced, investment into the sector may be affected.

Referring to the recent statements made by the Union Communications Minister, Mr Pramod Mahajan, that he is contemplating allowing open competition in the cellular sector (instead of the present limit of four per circle), they have stated that this would not only be unfair but also against the stated polices.

"It is extremely unnerving for investors who must carefully plan in this sector in the face of global resources and the state of the world's telecom industry. To talk of offering further licences (and accordingly blocking spectrum) when current operators are at such low levels and some fourth licensee operators have still not received their spectrum allocation, shows a lack of regard for the genuine needs of the existing operators and ignores the very significant amounts that have flowed to the Government by way of entry fees, licence fees, sales and service tax and employment opportunities," the letters state.

They further add that an unlimited number of players do not promote healthy and sustainable competition, but jeopardise the business viability of new entrants and could adversely affect the development of the telecom industry.

"After eight years of private sector entry into telecom, India still lacks a world-class interconnect regime. The regulator refuses to ensure interconnection or intervene, in spite of massive misuse of market power by the incumbent. Unfortunately, while interconnection is solely a regulatory power, there are hints of Government intervention," the letters note.

What is more, discriminatory procedures have been adopted for tariff setting, an open consultative process for one set of service providers and opaque procedure for the competitors of cellular service providers. Tariff setting by law is required to be an independent function of the TRAI. However, it seems to be seriously influenced by Government and private parties, the investors have stated.

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